In a move that could bring its long-running court fight with the music industry to a close, Napster Inc. filed for Chapter 11 bankruptcy protection Monday as part of its planned sale to German media giant Bertelsmann AG.

Experts say the filing in U.S. Bankruptcy Court in Delaware will probably result in the settlement of copyright infringement lawsuits that the world's biggest record companies and music publishers slapped on Napster in December 1999.

The filing spells out terms of a deal that Bertelsmann and Napster's board of directors approved May 17. Bertelsmann will acquire the assets of the once- popular online music-sharing firm. In exchange, Bertelsmann will provide $8 million in cash to pay off the Redwood City firm's creditors.

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As of April 30, Napster had $7.9 million in assets and $101 million in liabilities, which do not include the potentially costly damages for copyright infringement.

Bertelsmann is also Napster's biggest creditor, but it agreed to forgive $91 million it advanced in a series of loans and bailouts to Napster since October 2000, according to an affidavit filed by Napster Chief Financial Officer Carolyn Jensen.

Napster once claimed more than 70 million users worldwide, who were part of a grassroots file-sharing phenomenon that is still shaking the foundations of the entertainment industry, even though a court order effectively shut down the old Napster program 11 months ago.

Pretrial rulings by a federal judge and an appeals court in San Francisco found Napster potentially liable for billions of dollars in damages, although the cases were not expected to reach trial until at least early 2003.

The rulings are providing the recording and movie industries with legal ammunition to go after Napster's successors, such as KaZaa, Morpheus and Audiogalaxy.

But Napster continued to fight and recently scored a court ruling allowing it to probe the recording industry for possible antitrust violations.

The bankruptcy filing automatically puts the case on hold, and legal experts say the issues of law raised by Napster, such as whether consumers had the right to share digital copies of music or movies, will probably remain unresolved.

"For the bankruptcy to be resolved, that litigation must get resolved one way or another," said Bill Kelleher, a bankruptcy law expert and partner with Cohen & Grigsby of Pittsburgh.

A bankruptcy judge in certain instances can order a legal case against a bankrupt company to continue, but that would be highly unusual, Kelleher said. The big question, he said, would be, "Who's going to pay for it? The answer is likely to be there's not enough money to pay for defense costs."

Napster's bankruptcy filings said the company, which never generated revenue, could no longer afford to pay its employees and was about to run out of cash this month. In all, Napster fired 94 full- and part-time employees between March and May.

Napster's board could not agree on Bertelsmann's many offers to buy the company -- deals worth between $15 million and $30 million. Bertelsmann's near- final offer of $16.5 million in cash fell through in mid-May, resulting in a wild week in which top executives resigned in protest and the remaining 70 employees were sent packing.

But Bertelsmann's final bargain-basement offer brought back the top leaders,

Napster now has 18 full-time employees and one independent contractor. A bankruptcy judge approved plans Monday to rehire 28 additional employees and allow the company to continue operating and developing a new, legal music subscription service.

"Today's filing marks a new beginning for Napster," Napster Chief Executive Officer Konrad Hilbers said in a statement. "The Chapter 11 process will allow the company to move forward with a talented team and continue on the path toward launch, while pursuing a plan to make payments to our creditors."

"We look forward to Napster becoming a legitimate online music service in which artists and record companies are fairly compensated for the use of their works," Sherman said.

NAPSTER FILES FOR BANKRUPTCY

Key events in company's history. -- May 1999: Napster Inc. is founded by Shawn Fanning and Sean Parker. -- Dec. 7: Recording Industry Association of America sues Napster in federal court in San Francisco, alleging copyright infringement. -- April 13, 2000: Heavy metal rock group Metallica sues Napster for copyright infringement and racketeering. Rapper Dr. Dre files suit two weeks later. -- July 26: Federal judge Marilyn Hall Patel grants the recording industry's request for a preliminary injunction and orders Napster shut down. -- July 28: The Ninth U.S. Circuit Court of Appeals stays the lower court injunction, ruling that "substantial questions" were raised about the merits and form of Patel's injunction. -- Oct. 31: Napster announces partnership with German media giant Bertelsmann AG to develop a membership-based distribution system that would guarantee payments to artists. Under the deal, Bertelsmann agrees to drop lawsuit against Napster and make its music catalog available to Napster, while gaining the right to buy a stake in the service. -- Feb. 12, 2001: Appeals court says Napster must stop allowing music fans to use its service to share copyright material. A three-judge panel allows Napster to remain in business but tells a lower court judge to rewrite her injunction ordering Napster to shut down pending a trial in the music industry's lawsuit. -- March 8, 2002: Napster lays off 10 percent of its workers. -- April 10: The company lays off another 30 workers. -- May 14: Napster CEO Konrad Hilers resigns. Co-founder Fanning also steps down as the company's chief technology officer. -- June 3: The company files for Chapter 11 bankruptcy.